Ground-Up Construction Loans: Financing New Builds from Start to Finish

Ground-Up Construction Loans give builders, investors, and developers access to short-term financing that covers both the purchase of land and the cost to build new residential properties. These loans are designed for projects built from scratch — teardowns, infill lots, or vacant sites — and release funds in stages (draws) as work is completed. The JD.Mortgage team at Paramount Residential Mortgage Group, Inc. (PRMG) supports 1–4 unit residential projects nationwide (excluding New York), with flexible terms, high loan-to-cost options, and solutions for both experienced and first-time builders.

Who These Loans Are For

• Small builders, developers, and experienced investors
• Teardowns, rebuilds, and ground-up homes on vacant land
• 1–4 unit residential (non-owner-occupied)

Quick Facts

• Eligible properties: 1–4 unit residential
• Land type: buildable or entitled vacant lots and teardown sites
• Typical minimum loan: $100,000
• Maximum loan: often $5M+ (larger amounts may need secondary approval)
• Terms: 12, 18, or 24 months

How the Financing Works

Funds can cover both land purchase and construction. Loan-to-Cost (LTC) and Loan-to-Value (LTV) are reviewed separately to make sure the project makes sense.

• Construction costs: typically up to 100% financed (subject to experience, budget, and appraised value)
• Down payment: depends on land equity, experience, and leverage
• Interest: pay monthly or roll into the loan to preserve cash flow

Draws, Inspections, and Timing

• Funds are released in phases after work is verified
• Third-party or virtual inspections confirm progress before each draw
• Clear budget and schedule keep the project on track

Builder / General Contractor Requirements

• Licensed, insured general contractor is required for new construction
• Borrowers with strong past build or major renovation experience may act as their own GC
• GC signs a completion guarantee

Experience Flexibility

No prior ground-up build? You may still qualify if you’ve completed substantial rehabs, large additions, or ADUs. We evaluate relevant project history and team strength.

Projects Already Underway

Construction completion loans can step in mid-project if the structure is weather-tight (roof and windows installed) and the budget and scope are clear.

Common Exit Strategies

• Sell the property when construction is complete
• Refinance into long-term financing, including DSCR Loans for rentals

Simple Timeline Overview

1. Pre-close: budget, plans, permits, appraisal, and GC approval
2. Close + first draw: land purchase and initial construction funds
3. Progress draws: released after inspections confirm completed work
4. Final draw: after completion and final inspection
5. Exit: sell or refinance into a long-term loan

What You’ll Need to Get Started

• Purchase contract or proof of land ownership
• Plans, specs, and line-item budget
• Permits or permit status
• GC license, insurance, resume, and cost agreement
• Experience summary and recent project photos (if available)
• Appraisal (often “as-complete” valuation)

Numbers You Should Model

• Total project cost: land + soft costs + hard costs + contingency
• Projected ARV (after-repair value) and exit plan
• Monthly interest carry if not rolled in

Run quick payment estimates with our Mortgage Calculator.

Related Options

• Explore loan options beyond construction
• Learn about refinancing for your exit plan
• DSCR Loans for rental hold strategy

FAQs

Do these loans cover both land and construction?

Yes. Many projects finance land purchase and up to 100% of construction, subject to LTC, LTV, and experience.

Can I roll interest into the loan?

Often yes. Capitalized interest helps preserve cash during the build.

Do I need a licensed general contractor?

For new construction, a licensed and insured GC is required. Strongly experienced borrowers may qualify to act as GC.

What if my project has already started?

“Construction completion” financing is possible if the structure is weather-tight and documentation is clean.

How are draws released?

In stages after third-party or virtual inspections confirm completed work.

What’s a typical term?

12, 18, or 24 months depending on scope and schedule.

What are the exit options?

Sell at completion or refinance into a long-term loan, including DSCR options for rentals.

What affects my down payment?

Land equity, borrower experience, budget strength, and appraised “as-complete” value.

What This Means for You

Ground-Up Construction Loans make it simpler to buy land and fund the build in one package. With clear plans, a licensed GC, and a realistic budget, you can move from purchase to final draw with fewer surprises. Whether your exit is a sale or a refinance into a rental loan, the JD.Mortgage team will help you plan the numbers and the timeline so your project finishes strong.

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